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EUR/USD update (24th July 2012, 06:00)

In US trade, the euro remained under pressure, temporarily trading under 1.21 on continuing debt-related concerns out of Spain and Greece.

The market continued to speculate that it was only a matter of time before Spain required a full-blown sovereign bailout from the EU/IMF, while fears intensified that Greece will fail this week’s Troika review, limiting its access to further aid and putting it back on a path to inevitable default.

The deterioration in the eurozone consumer confidence index to -21.6 in July from -19.8 in June certainly did not help matters in the wake of ECB President Mario Draghi's earlier admission that inflationary pressures are falling faster than had previous been expected. This is a clear sign to market observers that another rate cut is on the cards by September. While the euro plunged on this data/comment, it managed to regain its composure after the initial slide, helped by the IMF's contention that it ’is supporting Greece in overcoming its economic difficulties‘ in an effort to defuse the earlier press reports, saying that IMF funding would be cut off.

The euro also found some support after Russian President Vladimir Putin's suggested that Russia had no plans to reduce the euro weighting in its reserves. Tonight’s European manufacturing PMIs will be a data series worth watching early in European trade. Having ended yesterday’s Australian session around the 1.2105 level, the euro slumped to a low of 1.2067 before recovering to close at 1.2117. Upon resuming for Asian trade, the euro is relatively steady to be currently in the low 1.2120s.